If you pulled up a graph of the Russian ruble relative to the dollar, you’d see a line that heads pretty steadily south from summer on. Monday, the ruble suffered its biggest one-day fall against the dollar since the late ’90s.
The drop is largely due to falling oil prices, since Russia is a large producer and exporter. Additionally, economic sanctions from the U.S. and EU due to Russia’s involvement with Ukraine are driving away investors. But another reason the ruble is losing value is because the Russian government isn’t trying to prop it up, says Alexander Kliment, with Eurasia Group, a research and consulting firm. The country had been spending billions buying rubles with the hope of stabilizing its value but stopped a few weeks ago, in part because it didn’t want to deplete its foreign reserves.
So what’s a country to do as its currency collapses?
Russia largely has to weather the storm, says Nicholas Spiro of Spiro Sovereign Strategy, which specializes in sovereign credit risk. Russia could try buying up the ruble on a massive scale and raising interest rates, but that’d be very expensive and very risky. It also could enact capital controls, like limiting the amount of money that people can take out of the country. But that’s unlikely he says, because it would send a terrible message to the markets.
Russia has another, equally unlikely option, says Will Pomeranz, deputy director of the Kennan Institute for Advanced Russian Studies at the Woodrow Wilson Center in Washington, D.C. The country could try to resolve the situation in Ukraine, in the hope that the U.S. and EU lift or reduce their sanctions.